The media's eyes might be on the results coming out of the Iowa caucus, but readers of Rent Free will know that the real news (housing news) is happening elsewhere. This week's stories include:
- Two major housing cases before the U.S. Supreme Court could determine what kinds of fees cities can slap on new housing and when they can fine the homeless for sleeping on public property.
- Pro-supply housing reformers are ditching big, do-it-all-at-once omnibus bills in favor of smaller, more focused legislation. Does this signal smaller YIMBY ambitions as well?
- A new paper finds that legalizing more housing doesn't make housing more expensive.
But first, our lead story, which neatly illustrates in real time how zoning destroys shelter.
Town Zoning Board Forces Landlord to Dismantle Unit, Evict Longtime Tenants
Two tenants in Claremont, New Hampshire, are being kicked out of their homes of a decade following a decision by the town's Zoning Board of Adjustment.
Since last summer, Claremont city officials have said that the tenants' two units were divided in violation of the zoning code and that they must be recombined into one apartment. Earlier this month, the zoning board shot down owner Zander Kempf's request for a variance that would have legalized the units and allowed the tenants to stay.
"We have a major housing crisis and a severe shortage of housing around the state and in Claremont," Kempf, a real estate investor who owns the apartments through the Claremont Fund, LLC, tells Reason. "By the city's request, we have to kick two tenants out who have been there for many, many years and who've called it their home."
The Mystery Unit
Kempf's 15,000-square foot property sports three roughly 100-year-old buildings with 13 units between. They long predate Claremont's zoning code, which only allows three units on the property.
The city accepts 12 of those units as legal but non-conforming units. That leaves a 13th unit, which appears and then disappears from city documents.
Some 1994 tax documents list the property as having 13 units, but a more recent certificate of occupancy shows only 12, according to a Claremont Planning Department report.
Kempf tells Reason that the property, which he purchased in 2020, was marketed as having 13 units, while tax documents described it as having only 12. Calls to the city's planning department during the purchasing process didn't produce any information about outstanding issues, he says.
But in July 2023, a routine fire safety inspection by the city discovered that what they thought was a three-unit building actually had four units in it.
It appears that a three-bedroom apartment had been subdivided into two one-bedroom apartments of around 500 square feet each. It's unclear when that additional unit was added, or by whom. There's also no record of any building permits having been pulled for the creation of the fourth unit, which is illegal under state law.
The additional unit also poses a zoning code problem, because non-conforming properties aren't allowed to be made more non-conforming. That means adding a 13th unit on a property zoned for three units is a no-go, regardless of whether it has building permits or not.
Failed Appeal
After it was discovered, Kempf tells Reason that he tried to legalize the 13th unit administratively with the city's planning department. The department, however, told him he either needed to recombine the two units into one apartment or ask the zoning board for a variance.
In November, Kempf applied for a zoning variance. At a zoning board meeting this month, his lawyer argued that allowing the 13th unit would only maintain the status quo on the property, and not create additional, negative impacts for anyone.
The board was unmoved.
"We are in a housing crunch, but that doesn't mean we can bend our codes to meet that," said Todd Russel, who chairs the zoning board, according to reporting from the local Eagle Times. "To me, public safety and public interest isn't about one tenant, and it's not about the financial loss of losing a rental unit. It's more about keeping everybody safe in the area."
The board voted to reject Kempf's application. He could appeal to the city council or local superior court but was told doing so wouldn't alter the result by his lawyer.
"The planning board has their discretion to decide these things. Our counsel didn't think there was much legal basis for [an appeal], although a moral and practical argument could certainly be made," he says.
That means his two tenants will now have to find somewhere else to live.
SCOTUS Weighs Major Housing, Homelessness Cases
The U.S. Supreme Court is taking a break from guns and abortion to take up two cases that could deliver some incredibly consequential rulings for property rights, housing production, and homelessness.
Sheetz v. County of El Dorado
Last Tuesday, the court heard oral arguments in the case of Sheetz v. El Dorado County. Petitioner George Sheetz, a California retiree, is challenging the constitutionality of a $23,000 traffic impact fee El Dorado County is demanding he pay for a permit allowing him to place a manufactured home on a single-family-zoned lot.
Sheetz's lawsuit argues the county's impact fee is an "unconstitutional condition" because it charges him for impacts he's not creating.
The county has argued that questions of unconstitutional conditions only apply to decisions made by individual bureaucrats. Since Sheetz's impact fee is set by legislation, it is exempt from challenges under this unconstitutional conditions doctrine.
California courts have thus far sided with the county. Tuesday's oral arguments suggest things could go Sheetz's way. Justice Neil Gorsuch said there was "radical agreement" that legislative exactions are still covered by the unconstitutional conditions doctrine.
Pacific Legal Foundation Attorney Brian Hodges tells Reason that Gorsuch's comments suggest the court could issue a narrow ruling definitively holding that legislative exactions can create unconstitutional conditions.
There's a smaller chance, he says, that the court could go further and declare that legislative exactions attached to building permits have to meet the same standards as bureaucratic exactions and bear an "essential nexus" and "rough proportionality" to the actual impacts of the permitted building.
Such a ruling would open up legal challenges to all sorts of legislative exactions known to suppress housing supply, including other impact fees charged to builders and even inclusionary zoning laws that require builders to offer some of their new units at discounted (often-money losing) rates.
To be sure, the Sheetz case only asks the Supreme Court whether legislative exactions are subject to unconstitutional conditions claims. The court isn't being asked to establish a standard for legislative exactions.
The court's liberal justices also expressed concern that requiring legislative exactions to have some sort of "rough proportionality" to actual impacts of individual properties would effectively prevent governments from imposing all generally applicable impact fees.
City of Grants Pass v. Johnson
On Friday, the Supreme Court agreed to hear City of Grants Pass v. Johnson, a case that deals with local governments' abilities to fine and jail the homeless for sleeping on public property.
This case stems from a 2018 decision by the U.S. Court of Appeals for the Ninth Circuit in the case Martin v. Boise, which ruled that cities' enforcement of camping bans against the homeless when alternate forms of shelter aren't available violates the Eighth Amendment's ban of cruel and unusual punishment.
Shortly after the Martin decision came down, homeless individuals in Grants Pass, Oregon, sued the city for enforcing a camping ban in public parks while not providing any shelter to the homeless. A Ninth Circuit panel ruled against the city, and the full circuit declined to rehear the case. Grants Pass petitioned the Supreme Court to hear the case in August.
Grants Pass, backed by amicus briefs from Gov. Gavin Newsom and the free-market Goldwater Institute, argues that the Martin decision "paralyzes" cities trying to protect public safety and address homelessness.
Homeless advocates had urged the Supreme Court not to take up the Grants Pass case, given the lack of a circuit split. They are now urging the Court to uphold the Martin decision.
"Cities that have failed to provide for the basic needs of their residents, like housing and shelter, should not be allowed to punish people when they have no safe place to go," said Jesse Rabinowitz of the National Homelessness Law Center in an emailed statement.
Do Smaller YIMBY Bills Equal Smaller YIMBY Ambitions?
Last year, housing supply-siders in Colorado, Arizona, and New York went for broke on big, bold housing bills that tried to squeeze through the entire "yes in my backyard" (YIMBY) agenda in one fell swoop. They all failed.
This year, housing is still a top issue in all three states, but housing supply-siders are forswearing omnibus bills in favor of smaller, more focused reforms.
New York
New York Gov. Kathy Hochul's 2023 State of the State policy platform called for a far-reaching "housing compact" that would require cities to upzone or else forfeit their powers to approve or deny new housing to the state.
The governor's 2024 housing proposals are far more modest. She's called for renewing tax credits for mixed-income housing projects, legalizing illegal "basement units" in New York City, and lifting state-set residential density restrictions in Manhattan.
Colorado
Last year, Colorado Gov. Jared Polis' office put together an expansive housing omnibus bill legalizing "middle housing" and accessory dwelling units, upzoning transit corridors, and requiring cities to plan for housing growth.
This year, housing is still on the governor's mind. He referred to the issue as his "Roman Empire" in his State of the State address last week. (For those who missed the meme, that means he thinks about it every day.)
But housing activists in the state tell Reason there will be no attempt at another big, omnibus bill this year. Instead, one-off bills legalizing ADUs, upzoning transit corridors, paring back parking minimums, legalizing single-stair apartments, and requiring more proactive, pro-growth planning on cities' parts will be introduced.
Arizona
It's the same story in Arizona. In 2023, the Legislature there considered a wide-ranging bill sponsored by Sen. Steve Kaiser (R–Phoenix) that would have allowed housing in commercial zones, legalized four-unit "middle housing" in single-family areas, limited hearings on new housing projects, and preempted local design and minimum lot size rules that foil starter homes.
That bill likewise failed and its champion, Kaiser, is now out of the legislature. Bills incorporating some of the reforms of last year's omnibus are set to be reintroduced, but there will be no unified pro-supply push.
Changing Tactics
The changing focus to smaller bills reflects lessons learned from last year's failed efforts.
In a big housing bill, there's "one thing that could sour a legislator," says Courtney LeVinus from the Arizona Multifamily Association. "Instead of an omnibus, we're going to focus on our niche areas."
Single-subject bills also allow lawmakers to advocate for their bills more effectively, says Johnathan Pira, an activist with YIMBY Denver.
Colorado's housing omnibus bill last year had three chief sponsors who were responsible for explaining every provision of a huge, sprawling bill and addressing all concerns about it to other legislators. That was a big lift. Dividing up the omnibus bill into single-subject legislation means more legislators can focus on explaining and advocating for smaller, more manageable reforms, says Pira.
The states that passed the most reforms last year, Washington and Montana, did so via smaller, one-off bills. (The one exception might be Oregon, which passed a bill overhauling its entire state-wide planning system.)
Nevertheless, smaller bills can also be read as a sign of smaller ambitions. Hochul's single-issue reforms add up to a lot less than what her housing compact would have accomplished. Not every element on Arizona and Colorado's omnibus bills is likely to be reconsidered this year.
This year's bet is that one is higher than zero and that more focused bills that actually pass will add up to more housing than a super-ambitious mega-reform that goes down in flames.
New Paper Finds Zoning Reform That Works Doesn't Raise Land Prices
A common argument against upzoning is that it doesn't actually improve housing affordability. Instead, increasing the allowable developmental capacity of land increases land values, which then gets tacked on to the costs of new housing. A new paper authored by Emily Hamilton at George Mason University's Mercatus Center finds evidence to the contrary.
Hamilton's paper looked at the results of two rounds of reform in Houston, Texas, that shrank the city's minimum lot size to 1,400 square feet—an effective upzoning in the famously unzoned city. Past papers have found that Houston's minimum lot size reform increased housing supply significantly. Hamilton's paper finds that land values stayed flat, or even decreased as a result of the reforms.
"In a case where upzoning leads to a large amount of newly built space, the effect on reduced rents may be equal to or greater than the value of the right to build more on a given piece of land," writes Hamilton.
It's possible upzoning single parcels in heavily supply-constrained cities increases land values, while the resulting additional supply does little to lower prices. The lesson from Hamilton's paper isn't that upzoning is useless, but that the more broad-based and productive the upzoning is, the more it'll improve affordability.
Quick Links
- Boston, Massachusetts, is significantly increasing its inclusionary zoning requirements.
- HUD Secretary Marcia Fudge appeared before a House oversight committee for a hearing dominated mostly by substanceless sniping between Fudge and committee chair Rep. Patrick McHenry (R–N.C.). The secretary did mention the negative impacts of zoning regulations, in between demands for more funding for her department.
- It's been a truism that federal regulations requiring manufactured homes to sit on a steel chassis are crushing the manufactured home market. Brian Potter, over at his great Construction Physics Substack, argues the steel chassis regulation should be eliminated but there's no evidence it's significantly impairing the market for modular housing.
- Rent control laws in Portland, Maine, are making landlords more choosy about who they rent to and more willing to leave units vacant for longer. Read Reason's past coverage of how DSA-backed ballot initiatives have wrecked Portland's housing market.
- In response to a Reason records request, the U.S. Department of Housing and Urban Development (HUD) released all email addresses for the department's political appointees…except the one for HUD Secretary Marcia Fudge.
- Boston's affordable housing is not so affordable to build. Government-subsidized, deed-restricted affordable housing typically is some of the most expensive housing to produce.
- More states are considering mileage fees and other user fees to replace the increasingly archaic gas tax.
- A judge has ruled that the State of Georgia is exempt from local zoning rules when it's using its own land for a public use. In this case, the public use is a subsidized electric car factory.
- Helena, Montana, is tabling zoning reforms it had undertaken in response to new state laws after a judge halted the implementation of those laws.
- Washington state lawmakers have introduced a bill to cap rent increases at 5 percent per year and require the landlord to provide six months' notice if they plan on raising the rent by more than 3 percent.
Regulation of the Week
Arlington, Virginia's zoning code allows businesses to paint murals on their building, so long as the mural does not depict any products the business sells. So, in short, you can paint a big slice of pizza on your building, so long as you don't sell pizza inside it.
The post Zoning Board Orders Longtime Tenants' Homes Dismantled appeared first on Reason.com.
